The investigations into the functioning — and subsequent payment crisis — of the National Spot Exchange Limited (NSEL) is set to widen with the Ministry of Corporate Affairs (MCA) deciding to bring under scrutiny several other companies and exchanges which have common directors or have defaulted in payments.
As many as 70 more companies and entities have thus come under the scanner in the case for which the Central Bureau of Investigation (CBI) has already registered a preliminary inquiry.
This was confirmed by corporate affairs minister Sachin Pilot who told The Indian Express, “We have expanded the scope of the inquiries by including affiliate companies and other entities located in Chennai, Gujarat and Mumbai and a report is expected to be submitted within two weeks. The Forward Market Commission has also been asked to look into the larger aspect of the scam.’’
Internal MCA documents show that on September 4 the minister had instructed that a larger ring of companies be brought under the scanner. This followed a reference to the ministry from the Ministry of Consumer Affairs which first alerted the MCA about a possible diversion of funds; money laundering and a payment crisis to the tune of Rs 5,600 crore.
Following an analysis of the alert from the Ministry of Consumer Affairs, Pilot noted on file that the matter involved “substantial public interest” given the size of the default and the fact that the company involved was an exchange.
He added, “A report under Section 234 of the Companies Act may immediately be called from the RoC (Registrar of Companies), Mumbai in respect of NSEL, its parent company ((Financial Technologies India Ltd), other companies in which directors of NSEL are directors, as well as all the companies in default in the matter...’’
Documents show that following the directions, the RoC submitted a list of 50 companies where directors of NSEL were also directors. In addition, the Serious Fraud Investigation Office (SFIO) has sent the ministry data that shows that lists 20 corporate entities who are NSEL defaulters.
On September 10, instructions were issued by the Ministry of Corporate Affairs that the balance sheets of the 20 companies listed by the SFIO should be scrutinised.
Significantly, joint secretary LR Meena also instructed that eight other companies be put under scrutiny. Besides NSEL and FTIL, the list includes LA-FIN Financial Services Pvt Ltd; Multi Commodity Exchange of